DETERMINANTS OF FOREIGN DIRECT INVESTMENT AND ITS LINKAGE WITH INTERNATIONAL BUSINESS IN INDIA: AN EMPIRICAL ANALYSIS (1991–2025)
DOI:
https://doi.org/10.69980/2ydmmd20Keywords:
Foreign Direct Investment, India, OLI Paradigm, Trade Openness, Infrastructure, Global Value Chains, Production-Linked IncentivesAbstract
This paper examines the macroeconomic determinants of India's aggregate inflows of foreign direct investment (FDI) between 1991 and 2025 and assesses the extent to which cumulative FDI has shaped India's international business performance. Using the data from post reform perio(1995–2025) drawn from the Department for Promotion of Industry and Internal Trade, the Reserve Bank of India, the World Bank and UNCTAD, the study integrates descriptive trend analysis, Pearson bivariate correlation and multivariate ordinary least squares (OLS) regression within Dunning's OLI framework. The results show that market size (GDP), infrastructure quality, trade openness and the post-2014 policy reform regime are strongly and positively associated with FDI inflows, while inflation exerts a smaller negative effect. All five directional hypotheses are supported, and the model explains 98 per cent of the variance in FDI inflows across benchmark years. The paper further finds that cumulative FDI has been closely linked to India's services and technology export boom and to selective gains in global value chain participation and technology spillovers but these benefits remain concentrated in a small number of sectors, states and source jurisdictions. The study contributes an updated empirical baseline extending beyond 2015. It bridges the traditionally separate literature on determinants of FDI and consequences of FDI literatures and offers policy recommendations centred on infrastructure investment, macroeconomic stability, and supplier development.
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